Pharmax is a family owned and managed company with turnover close to INR 700 Crores. Pharmax is a leading name in the Active Pharmaceutical Ingredient (API) and Finished Drug Formulation (FDF) segments which is sold in both the regulated and the generic markets in India and over 50 countries worldwide. The company has state of the art manufacturing facilities approved by US FDA and has 17 Abbreviated New Drug Application (ANDA) filed and 12 in the pipeline.
Challenges for MyCFO
Budgeting at Pharmax was a simple ‘spread sheeting’ exercise restricted only to collation of data inputs received from various departments. The variance between budgets and actuals for instance in financial year 13-14 was more than 80%. The variances were reported every month to the HOD’s and the management on a month on month basis for their review and comments.
MyCFO’s mandate here was to play the role of an ongoing CFO for Pharamax. MyCFO’s approach was to identify the principal reason behind the budgeting exercise, which in this case was to help the management get a clear idea on the cash flow requirement and in helping them stabilize the FDF business. This was followed by a communication from the management team on the need for the departments to participate in the budgeting exercise. A 6 member budgets team was constituted which was lead by MyCFO. This was followed by one on one meetings with the department heads where targets were discussed and agreed. Some of the meetings which involved key decision making were attended by the promoters. The targets were discussed and debated amongst teams on parameters such as stock (max order quantity, credit period, lead time, logistics, distribution), debtors, creditors, zero based budgeting for PDF business, competency of personnel involved in the process, inter departmental dependencies, product strategy, capacity utilization, investment in fixed assets and ANDA, making each SBU within the company profitable, EBITDA improvement, misses and issues based on last year’s achievements amongst others. The budget exercise was finally completed in 8 weeks with 3 revisions. The exercise also served to set individual KPI’s for department heads and were eventually linked to incentives.
How the client benefited
The budget exercise allowed standardization of MIS reports across the company, helped the company to institute and track performance for the Senior Managers, formation of the budget committee helped the departments to resolve potential issues which may come in the way of achievement of targets. The process also allowed a formal mechanism to review actual progress and it also set the ball rolling in terms of weekly monitoring reports on sales, cash flow, stock movement to the management.
Pharma Group is a global leader in excipient solutions. The Group develops, produces, and markets excipients for oral solid dose and dry powder inhalation formulations. The Group’s customers are leading pharmaceutical companies. The Group had taken over a closely held Indian company 2 years back and needed MyCFO to manage the Post merger acquisition as their India CFO.
MyCFO’s role was to ensure correct, accurate, complete and timely review of day to day accounting based on accounting conventions and principles in line with Indian GAAP and IFRS, addressing issues that came up as part of the due diligence process, Develop and report MIS to the India CEO, Complete timely monthly reporting to Group CFO, ensure local compliances, Implement internal controls in line with Group policy, Assist in the implementation of the Group ERP (Navision), Participation in fortnightly review India CEO and the Group CFOs office, authorizing and tracking of expenses, liaise with the auditors for accounts finalization, setting the India budgets, managing and forecasting future cash flows, getting involved in monthly review meetings with the India CEO and the Group CFO and measuring business performance by setting up profit center accounting and reporting. The role comes with accountability to deliver results that an in house Controller/CFO would take on had there been one.
How the client benefited
MyCFO’s involvement resulted in clean up of accounting and compliance related legacy issues, reduced monthly reporting time from 8 weeks to 1 week, implementation of an ERP system within 6 months from the start date, discontinuation of non – profitable products by developing robust costing systems and in reduction of debtors collection cycle from 120 days to less than 45 days.
Diagnostic Center is an ultramodern diagnostic centre with comprehensive facilities for Laboratory, Imaging investigations and other diagnostic facilities headquartered in Mumbai. Lifecare provides digital x-ray, digital imaging, mammography, bone densitometry, sonography, cardiac imaging, advanced dentistry, spirometry, eye check up amongst others.
MyCFO plays the role of a full fledged CFO for the Diagnostic Center which involves partnering the CEO to support the execution of Diagnostic Center’s Business Plan, implementing a high quality MIS on both the Finance and the operating side which involves defining, designing and tracking of KPI’s, providing visibility into financial and operating performance through visual dashboards to the CEO. MyCFO has also assisted the Center to implement best practices and process improvements through development of Standard Operating Procedures (SOP’s), implement performance measurement systems for the Finance team, streamlining working capital flows including setting credit controls, improve collection mechanisms from hospitals and monitoring cash flows through preparation of rolling cash flow forecasts. MyCFO also plays a commercial decision making role by being involved in equipment purchase decisions, opening of new centers and front ending discussions with existing and potential franchisees.
How the Client benefited
MyCFO’s involvement helped Improve collections from 90 days to 30 days, resulted in cost savings of 20% in costs relating to re-agents and consumables, closure of non – profitable units based on unit level P&L and Break even point analysis, increased stickiness of clients through introduction of loyalty schemes based on our analysis on repeatability of clients, improved prices for certain tests buypto 30% based on accurate test level costing and improvement in sales efficiency by 10% through regular sales person performance tracking
Hospital Care is amongst the top 10 hospital chains currently operating in India and operates 10 hospitals in Maharashtra with a bed capacity of approx 750. The chain is Private Equity backed and is in the middle of a significant expansion plan. Management expectations are for Finance and Accounts (F&A) department to provide visibility on Return on Investments from the new facilities, capacity utilization, hospital profitability and Return on Capital Employed (ROCE). The Hospital also runs ‘health care delivery’ centers and specialty labs within each of the hospitals that they operate.
The Hospital Chain and the Private Equity Fund have recently engaged MyCFO to Benchmark the F&A’s staff capability with the best practice run hospitals. The role involves documenting the key outputs delivered by key F&A staff currently, their frequency and an assessment of the quality of such output, best possible organization structure in F&A to support the execution of Hospital Care’s Business Plan, Possible re-deployment of resources to enable more and better quality output, with the same F&A staff strength, Evaluation of what tasks may need to be executed by the chain’s F&A in the next 12 months, along with an assessment of which of these tasks can be carried out by existing F&A team and which ones may need external assistance. The objective of the study is to recommend ‘SMART’ measures to improve Finance Effectiveness.
How the Client benefited
MyCFO’s involvement helped Hospital Care to redeploy their team’s time from routine activities to those that resulted improvement of Finance Department effectiveness and allowed them to free up man power through implementation of systems and better utilization of current processes.
Implant India is an exclusive distributor of orthopedic implants and joint replacement products. The parent company is a leader in the manufacture and distribution of medical implants. The group is amongst the top 3 companies in this space globally.
MyCFO role involves acting as the sounding board to the business team at Implant India. The role involves helping the management with a 3 year business plan, cash flow forecasting and fund management, inventory control, distributor evaluation and decision making based return on investment calculations, driving the finance agenda for Implant India, Product costing and fixing pricing and to play the role of a partner to the CEO/ business.
How the Client benefited
MyCFO’s involvement has helped in 15% reduction in inventory holding through better visibility on implant consumption patterns, 10% improvement in sales through better distributor performance management, cash flow improvements by 12% through reduction in debtor days, 25% improvement in order to dispatch turn around time, implementation of bar coding system to help track inventory movement